A funny jab at politicians 4/23/08

From Bloomberg yesterday-I'll let it speak for itself.

Here's a Financial Literacy Quiz for Congress: Caroline Baum

Commentary by Caroline Baum

April 22 (Bloomberg) -- The U.S. government is making a push to improve financial literacy in this country. Whether you're investing your 401(k) retirement account, buying a home or choosing the right mortgage, a working knowledge of economics and finance has become a necessity.

Financial literacy begins at home, which means those who write the laws we live by should understand the unintended consequences. With members of Congress rushing to craft legislation to help folks hurt by the housing bust, they should first be required to pass a simple, multiple-choice test before they can send a bill to the president.

Members have 25 minutes to complete the quiz. Reference materials are not allowed in the classroom. Consultation with colleagues is prohibited until the test has been completed.

1. The U.S. just experienced the biggest residential real- estate bubble in its history. As housing starts, sales and prices fall back to earth, lawmakers should:

a) Create a housing czar to terrorize predatory mortgage lenders;
b) Provide a $25,000 tax credit to first-time homebuyers to re-stimulate artificial demand for housing;
c) Commit to 60 hours of volunteer work each at Habitat for Humanity;
d) Use banking contacts in their districts to identify choice foreclosed properties to purchase before they go on the auction block.

2. The Doctrine of ....Too Big to Fail'' means:

a) Too big to fail after contributing generously to my 2008 re-election campaign;
b) Too big to fail to get off the front pages, which means my constituents will notice and pester me to do something;
c) Too small to bother with when we could have done something;
d) Fannie Mae.

3. Federal Reserve Chairman Ben Bernanke has slashed short-term interest rates, created new lending facilities and opened up the Fed's discount window to a select group of non-banks. What he needs to do now is:

a) Be more cooperative at congressional hearings. Answer our questions on tax-and-spending policy -- on anything we choose to ask -- so that we can point to his advice when things go wrong;
b) Be more like Alan Greenspan (see ....a'' above);
c) Distribute his resume so Representative Marcy Kaptur, Democrat of Ohio, knows he's from Princeton, not Goldman Sachs;
d) Think about submitting his resume to Goldman Sachs.

4. The idea behind credit derivatives was to spread the risk from those who don't want it to those who do. Instead, the lack of transparency surrounding bundled, securitized mortgages (CDOs) compounded the losses from rising delinquency and foreclosure rates. CDO stands for:

a) Congressional Donor Outreach;
b) Chief Deregulation Obstacle;
c) Chronic Deficit Organization;
d) Crumpets and Doughnuts Offered.

5. Many lawmakers are invoking the Great Depression to build support for more government intervention in the economy. In order to prevent a repetition of that decade and to demonstrate your grasp of fiscal policy, complete the following sentence: The Great Depression ended because ________:

a) Bread lines encouraged bakers to supply more loaves, which meant hiring more bakers and reducing unemployment;
b) The Japanese bombed Pearl Harbor;
c) Something having to do with FDR's programs;
d) There were no more make-work projects on the to-do list, so individuals were forced to go back to work in the private sector, which paid better.

6. Crude oil prices seem to reach new highs every day. The national average gas price set a record last week of $3.39 a gallon, cutting into the consumer's discretionary spending. Congress should:

a) Accuse Big Oil companies of collusion and threaten to enact a windfall profits tax;
b) Sponsor a field trip to a state-of-the-art offshore oil rig in the Gulf of Mexico to see why it costs more than half a million dollars a day to drill in 5,000 feet of water and through 15,000 feet of rock;
c) Open an E-Trade account to trade crude oil futures in the Senate cloak room;
d) Buy a Prius and leave the worrying to someone else.

7. The housing bubble was caused by:

a) Stock speculators, who had to find another playground once the Internet and technology stock mania collapsed in 2000;
b) Used car salesman, who found gainful employment as mortgage lenders when the U.S. auto industry hit a speed bump;
c) The belief that soaring home prices were a sign of ....froth,'' not a bubble, according to Greenspan, a distinction that might elude the average condo-flipper in Miami;
d) Congress, because of its efforts to eliminate the practice of ....redlining,'' or discriminating against low-income, inner-city families. The lawmakers who are up in arms about predatory mortgage lending now are probably the same ones who pressured banks in previous decades to lower loan standards and extend credit to folks with a checkered repayment history.

8. The purpose of the tax code is:

a) To empower astute government bureaucrats to pick economic winners and losers. (For a history of recent picks, see ethanol subsidies, which contributed to food shortages, hundreds of millions of dollars in food aid for developing countries and an increase in greenhouse gases.)
b) To ensure full employment for lobbyists;
c) To encourage ....good'' behavior, such as homeownership, and discourage ....bad'' behavior, including smoking and drinking.
d) To create enough lucre to pay for the 11,610 pork-barrel projects in fiscal 2008, the second highest ever and a 337 percent increase from 2007, according to Citizens Against Government Waste, a private, non-profit group dedicated to eliminating waste in the federal government. This is after ....Congress adopted earmark reforms last year,'' the CAGW says.

9. With the baby boomers starting to retire, Congress is facing big decisions on how to pay for Medicare and Social Security and what kind of benefits retirees are to receive. To solve the problem, Congress should:

a) Form a commission to look at the options and appoint Greenspan chairman.
b) Ship the old folks to France, where health care is the envy of the world, according to Princeton University economist Paul Krugman;
d) Build a wall to keep immigrants out, then tear it down to let more of them in to pay the taxes needed to support beneficiaries in the style to which they've been accustomed.
d) Pretend there's not a problem and let the next set of lawmakers worry about it.

10) Term limits are a bad idea because:

a) I'm not qualified to do anything else;
b) I'd sacrifice these terrific federal employee benefits;
c) I haven't got my lobbyist job lined up yet;
d) Washington at cherry blossom time beats East St. Louis anytime.

The answers to the quiz and lawmakers' grades will be published in the 2009 federal budget. That would be an incentive to wade through the document -- for perhaps the first and last time in their long and illustrious careers.

(Caroline Baum, author of ....Just What I Said,'' is a Bloomberg News columnist. The opinions expressed are her own.)

To contact the writer of this column: Caroline Baum in New York at cabaum@bloomberg.net.

Last Updated: April 22, 2008 00:03 EDT